Bulls n Bears Daily Market Commentary : 29 October 2020

[Bulls n Bears]

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Bulls n Bears Daily Market Commentary : 29 October 2020

 


 

 


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ZSE commentary

 

ZSE recovers in Thursday’s session… 

Top capitalised stock CBZ led the market recovery in Thursday’s session after the banking group surged 11.60% to close at vwap of $39.9528. Resultantly, the blue chips Index gained 2.24% to 943.89pts while, the mainstream All Share Index rose 1.39% to 1483.18pts. The Industrials improved 1.44% to end at 4,882.62pts while, the Mining Index was stable at 3,606.34pts. Hotelier African Sun put on 3.53% to $1.6844 while, Hippo grew 2.17% to settle at $14.0485. Medtech advanced 0.63% to $0.0805 while, ART capped the top five gainers of the day on a 0.44% rise to $2.3000. Nampak was the major casualty of the day with a 6.19% loss to $0.7500, followed by crocodile skin producers Padenga which trimmed 2.81% to $13.6071. Financial services group ZB slipped 0.98% to $17.7186 while, apparel retailers Edgars let go a further 0.94% to close at $0.9500.

 

Banking group FBC completed the top five shakers of the day on a 0.85% slide to $13.8000. Fallers outnumbered gainers by a count of four to see the market close with a negative breadth. Volume of shares traded ballooned 108.95% to 4.14m as Medtech and OKZIM claimed 52.75% and 14.41% of the aggregate respectively. Turnover jumped 170.54% to $16.72m as ZB, Delta, OKZIM and Innscor accounted for a combined 74.37% of the aggregate. Local purchases accounted for 97.99% of value outturn while, sales claimed 79.48% of the same

 

 

Global Currencies & Equity Markets

 

South Africa

 

South African Rand Illustrates Mixed Views on Budget and Rating Outlook

 

The Rand was volatile on Wednesday as investor risk aversion set the stage for a pandemic edition of South Africa's budget, with price swings effectively illustrating mixed reviews of Finance Minister Tito Mboweni's latest homework. 

 

South Africa's Rand was already deep underwater when Finance Minister Mboweni addressed parliament on Wednesday, with emerging market currencies paying hand over fist for investor unease about another European lurch toward 'lockdown. 

 

The Rand was sharply lower from some of its highest levels since March, with USD/ZAR up 1.15% while the Pound-to-Rand rate was left 0.78% higher for the session, although price action over the balance of the European session since the budget was somewhat inconclusive. 

 

Treasury's aim is now to reach a primary budget surplus by 2025/26, later than the 2023/24 objective set out in June's emergency budget, and that debt-to-GDP will now stabilise at 95.3% in the same year. 

 

The envisaged peak in the debt-to-GDP ratio is higher than the 87.4% tipped back in June for 2023/24, but lower than the 100% that some speculation had suggested might be likely, reflecting the mixed implications of the budget. 

 

Spending cuts will now be R83bn less than was planned in June, although many economists and analysts had already written the earlier off as unfeasible while Treasury remains committed to tightening its belt in the coming years. 

 

 

 

South Africa was stripped of its last remaining ‘investment grade’ credit rating in March, rendering it a ‘junk’ borrower in a decision that preemptively weighed on the Rand for months beforehand, although some fears are that pandemic-related borrowing will lead to further downgrades. 

 

Further downgrades would mean higher government financing costs, making current and future debt-funded expenditure even less affordable. That could cultivate expectations of even greater cuts than those planned, ultimately crimping growth and lengthening the economy's road to recovery.

 

Treasury now forecasts the economy will contract by -7.8% in 2020 before rebounding by 3.3% in 2021, with growth averaging 2.1% over the next three years, which implies a prompt slowing of the recovery in 2022 and 2023. 

 

Investec says Wednesday's budget figures "do present more realistic projections for SA both on the debt and fiscal deficit side, as does the realism that severe tax hikes will cause slower economic growth," but have warned that rating agencies will likely worry about the government's ability to meet its targets. 

 

Much of the planned expenditure reduction is intended to come through below-inflation pay increases for public sector workers with which the government has a 2018 agreement that affords protection to their pay packets.  

 

Even before the pandemic and its resulting costs, earlier unsuccesful attempts at fiscal restraint had targeted public sector pay packets and been challenged in the courts as well as through unionised action.

 

It's possible that legal action will at the least delay some of the envisaged fiscal consolidation, although it's not clear that rating agencies will wait that long before downgrading South Africa further.

 

This would potentially have consequences for international participation in the domestic bond market and demand for the Rand. 

 

 

Nigeria

 

Naira falls at black market as dollar supply drops

At the black market,  the Naira depreciated against the dollar to close at N465/$1 on Wednesday.

 

Forex turnover drops by 47.5% as Nigeria’s exchange rate at the NAFEX window appreciated against the dollar to close at N385.67/$1 during intra-day trading on Wednesday, October 28.

 

Also, the naira depreciated against the dollar, closing at N465/$1 at the parallel market on Wednesday, October 28, 2020, as businesses open up after relaxation of the curfew initially imposed to curtail the widespread violence that followed the hijacked #EndSARS protests.

 

This is also as businesses shut down due to the outbreak of violence in Lagos and some parts of the country during the protests against the special anti-robbery unit (SARS) and police brutality by the Nigerian youths.

 

Parallel market: According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N465/$1 on Wednesday. This represents a N2 drop when compared to the N463/$1 that it exchanged for on Tuesday, October 27.

 

 

·         The local currency had strengthened by about 7.8% within the one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.

·         The CBN has sold over $500 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.

·         However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.

·         The President of the Association of Bureau De Change Operators, Aminu Gwadebe, said he expects the impact of the extra liquidity in the market to be gradual.

·         Despite the drop in speculative buying of foreign exchange, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.

 

 

This represents a 33 kobo gain when compared to the N386/$1 that it exchanged for on Tuesday, October 27.

The opening indicative rate was N385.89 to a dollar on Wednesday. This represents a 97 kobo drop when compared to the N384.92 that was recorded on Tuesday.

The N393.42 to a dollar is the highest rate during intraday trading before it closed at N385.67 to a dollar. It also sold for as low as N380/$1 during intraday trading.

 

 

According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $138.60 million on Tuesday, October 27, 2020, to $73.01 million on Wednesday, October 28, 2020.

·         The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate their funds.

·         The drop in dollar supply after the previous trading day’s huge increase reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.

·         As part of the measure to check forex abuse and check illegal transactions, the CBN last month directed the freezing of accounts of about 38 companies.

·         The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.

·         Total forex trading at the NAFEX window in the month of September was about $1.98 billion, compared to $843.97 million in August.

·         The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

 

 

Global Markets

 

Silver price to push above $30 an ounce in 2021 despite short-term turbulence - Metals Focus

(Kitco News) - Caught in a consolidation pattern, the silver market could remain under pressure in the near-term, but one research firm says that the precious metals long-term fundamentals remain intact.

 

In a report published Tuesday, analysts at U.K.-based research firm Metals Focus said that because of resilient demand, gold prices should end the year near its August highs; meanwhile, looking to 2021, the analysts say they see silver prices pushing “well above” $30 an ounce.

 

The comments come as silver prices have dropped through initial support at $24.00 an ounce. December Comex silver last traded at $23.48 an ounce, down nearly 4.5% on the day.

 

The analysts noted that even during silver's nearly two-month consolidation period, investment demand has remained robust.

 

Although gold prices have hit all-time highs this year, Metals Focus doesn't see that for silver just yet.

 

The analysts said that they see a new silver rally coming after the Nov. 3 U.S General Election.

 

Although Metals Focus remains a long-term silver bull, they note that investors should expect to see more volatility in the near term as expectations surrounding global economic growth continue to shift.

 

At the same time, the U.K.-research firm said that growing mine supply could also be a headwind for prices. They expect that to see a continued supply surplus in silver this year and in 2021.

 

 <mailto:info at bulls.co.zw> 

 

 

 

 

Commodities Markets

 

 

Copper falls as demand concerns resurface

 

LONDON — Copper prices fell on Thursday as worries about growth and demand were reinforced by the second wave of COVID-19 and lockdowns in Europe while the market awaits the result of next week’s U.S. presidential election.

 

Benchmark copper on the London Metal Exchange (LME) traded 0.6% down at $6,708 a tonne in official rings. Prices of the metal used widely in the power and construction industries are down nearly 5% since hitting 28-month highs last week.

 

The Bull & The Bear: David Rosenberg and Brian Belski on where the markets are headed next

Close sticky video

Opinion polls on the U.S. election show President Donald Trump’s rival Joe Biden with a significant edge nationally, but his lead is tighter in the so-called battleground states.

 

DOLLAR: A falling U.S. currency makes dollar-priced commodities cheaper for holders of other currencies, which could boost demand and prices.

 

TECHNICALS: Copper is struggling to hold above support at $6,725-$6,730, where the 21-day moving average currently sits. A sustained break below will meet support at $6,690, the 50-day moving average.

 

 

TIN: Stocks of the soldering metalin LME-registered warehouses, at 4,575 tonnes, are down more than 15% since Oct. 16 and at their lowest since August.

 

Worries about supplies on the LME market have created a premium for the cash contract over three-month metal. It rose to $29 a tonne last week, the highest since late July, and was last at $6 a tonne.

 

Three-month tin was down 1.3% at $17,700 a tonne.

 

ECB: The European Central Bank is expected to resist pressure to announce fresh stimulus measures on Thursday, but it is likely to pave the way for action in December.

 

OTHER METALS: Aluminium was down 0.8% at $1,795.5 a tonne, zinc lost 0.5% to $2,516, lead climbed 1.1% to $1,813.5 and nickel slid 1.9% to $15,435.  

 

 

Silver Price Forecast – Silver Markets Rally But Pull Back

Silver markets tried to rally for the trading session on Tuesday but pulled back from the 50 day EMA to form a less than impressive candlestick.

 

Silver markets rallied a bit during the trading session on Tuesday only to find resistance near the 50 day EMA. By pulling back from that moving average, it shows that we are going to continue to struggle in general, and it looks like we are going to reach down towards the $24 level. If we can break down below there, then the market is likely to go looking towards the $22 level. Underneath, the 200 day EMA is going to offer quite a bit of support as well. In other words, I do think that it is only a matter of time before the buyers return. Having said that, I have no interest in trying to get too cute with this and I recognize that this is a market that is on edge.

 

You could make an argument that we are forming a little bit of a “rounding top”, but I would not read too much into it. With central banks around the world throwing liquidity into the marketplace, it is likely that we are going to eventually see people buying “hard assets.” I would love to get an opportunity to buy silver based upon some type of supportive daily candlestick, or even better yet, a weekly candlestick. As we have the election next week, I suspect that the markets in general will probably go back and forth overall, and silver will probably continue to be the same way. Ultimately, this is simply a matter of looking or value and taken advantage of it.

 

 

 

 


 

INVESTORS DIARY 2020

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


Falgold

EGM

1st Floor, KPMG Building, 133 Josiah Tongogara Avenue, Bulawayo

29/10/2020 | 10:00 am

 


Bindura

AGM

Virtual

05/11/2020 | 14:00

 


Natfoods

AGM

Royal Harare Golf Club

09/11/2020 | 8:45am

 


Afdis

AGM

virtual

13/11/2020 | 12:20pm

 


Zimbabwe

National Unity Day

Zimbabwe

22/12/2020

 


 

Christmas Day

 

25/12/2020

 


 

Boxing Day

 

26/12/2020

 


 

New Year’s Day

 

01/01/2021

 


 

 

 

 

 


 

 

 

 


 

 

 

 


Invest Wisely!

Bulls n Bears 

 

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

 


 

 


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